North Carolina-based real estate investment trust (:REIT), Highwoods Properties Inc. (HIW) recently acquired two new Class A Greensboro-based office buildings for $32.8 million. The purchase price also includes planned upcoming building renovation worth $2 million. The properties were acquired from CBL-ST Building LLC, subsidiary of a retail REIT – CBL & Associates Properties, Inc. (CBL).
The properties spanning 195,000 square feet are situated in Green Valley Office Park and are among Greensboro’s top office buildings. These are positioned at 628 and 701 Green Valley Road in the park and are in close proximity to lodging and dining places. The 95.5% leased buildings boast offices of some top-notch tenants – SunTrust Banks, Inc. (STI), The Fresh Market, Inc. (TFM) and Nexsen Pruet.
The Greensboro region of North Carolina is one of Highwoods’ core operational markets. The company has over 25 premium office buildings in the area. Management remains upbeat regarding the buyouts of these two top-class assets. It expects the assets to be immediately accretive to company’s FFO (fund from operations) and generate full year 2013 NOI (net operating income) of $3.1 million.
Highwoods is currently repositioning its portfolio to focus on stronger long-term markets and newer assets. A large part of the company’s portfolio is now concentrated in the high-growth Sun Belt markets, which provide above-average job growth owing to long-term demographic trends. Accordingly, in early December 2012, Highwoods acquired its second Class A multi-tenant office building – EQT Plaza – situated in Pittsburgh for $91.2 million. The acquisition expanded its footprint in downtown Pittsburgh by 40%.
In addition, Highwoods provided an update regarding its at-the-market (:ATM) program. On October 30, 2012, the company issued 1,953,770 shares of common stock and generated net proceeds of $62.8 million. Highwoods currently has 84.3 million shares outstanding under its ATM program.
Highwoods is expected to release its fourth-quarter 2012 results on February 4, 2013. The Zacks Consensus Estimate for the company’s fourth quarter FFO is currently pegged at 68 cents per share.
The Earnings ESP (Expected Surprise Prediction), the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate, for Highwoods is nil. This, combined with its Zacks Rank #3, reflects that the company is expected to report in line with the Zacks Consensus Estimate in the fourth quarter.
We presently have a long-term ‘Neutral’ recommendation on Highwoods.
Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.
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